7 U.S.C. § 2001 - Debt restructuring and loan servicing
|Cite as:||7 U.S.C. § 2001|
|Currency:||Current through P.L. 116-135 (03/26/2020)|
(a) In general
The Secretary shall modify delinquent farmer program loans made or insured under this chapter, or purchased from the lender or the Federal Deposit Insurance Corporation under section 1929b of this title, to the maximum extent possible-
(1) to avoid losses to the Secretary on such loans, with priority consideration being placed on writing-down the loan principal and interest (subject to subsections (d) and (e)), and debt set-aside (subject to subsection (e)), whenever these procedures would facilitate keeping the borrower on the farm or ranch, or otherwise through the use of primary loan service programs as provided in this section; and
(2) to ensure that borrowers are able to continue farming or ranching operations.
To be eligible to obtain assistance under subsection (a)-
(1) the delinquency must be due to circumstances beyond the control of the borrower, as defined in regulations issued by the Secretary, except that the regulations shall require that, if the value of the assets calculated under subsection (c)(2)(A)(ii) that may be realized through liquidation or other methods would produce enough income to make the delinquent loan current, the borrower shall not be eligible for assistance under subsection (a);
(2) the borrower must have acted in good faith with the Secretary in connection with the loan as defined in regulations issued by the Secretary;
(3) the borrower must present a preliminary plan to the Secretary that contains reasonable assumptions that demonstrate that the borrower will be able to-
(A) meet the necessary family living and farm operating expenses; and
(B) service all debts, including those of the loans restructured; and
(4) the loan, if restructured, must result in a net recovery to the Federal Government, during the term of the loan as restructured, that would be more than or equal to the net recovery to the Federal Government from an involuntary liquidation or foreclosure on the property securing the loan.
(c) Restructuring determinations
(1) Determination of net recovery
In determining the net recovery from the involuntary liquidation of a loan under this section, the Secretary shall calculate-
(A) the recovery value of the collateral securing the loan, in accordance with paragraph (2); and
(B) the value of the restructured loan, in accordance with paragraph (3).
(2) Recovery value
For the purpose of paragraph (1), the recovery value of the collateral securing the loan shall be based on-
(i) the amount of the current appraised value of the interests of the borrower in the property securing the loan; plus
(ii) the value of the interests of the borrower in all other assets that are-
(I) not essential for necessary family living expenses;
(II) not essential to the operation of the farm; and
(III) not exempt from judgment creditors or in a bankruptcy action under Federal or State law; less
(B) the estimated administrative, legal, and other expenses associated with the liquidation and disposition of the loan and collateral, including-
(i) the payment of prior liens;
(ii) taxes and assessments, depreciation, management costs, the yearly percentage decrease or increase in the value of the property, and lost interest income, each calculated for the average holding period for the type of property involved;
(iii) resale expenses, such as repairs, commissions, and advertising; and
(iv) other administrative and attorney's costs; plus
(C) the value, as determined by the Secretary, of any property not included in subparagraph (A)(i) if the property is specified in any security agreement with respect to such loan and the Secretary determines that the value of such property should be included for purposes of this section.
(3) Value of the restructured loan
(A) In general
For the purpose of paragraph (1), the value of the restructured loan shall be based on the present value of payments that the borrower would make to the Federal Government if the terms of such loan were modified under any combination of primary loan service programs to ensure that the borrower is able to meet such obligations and continue farming operations.
(B) Present value
For the purpose of calculating the present value referred to in subparagraph (A), the Secretary shall use a discount rate of not more than the current rate on 90-day Treasury bills.
(C) Cash flow margin
For the purpose of assessing under subparagraph (A) the ability of a borrower to meet debt obligations and continue farming operations, the Secretary shall assume that the borrower needs up to 110 percent of the amount indicated for payment of farm operating expenses, debt service obligations, and family living expenses.
Within 90 days after receipt of a written request for restructuring from the borrower, the Secretary shall-
(A) make the calculations specified in paragraphs (2) and (3);
(B) notify the borrower in writing of the results of such calculations; and
(C) provide documentation for the calculations.
(5) Restructuring of loans
If the value of the restructured loan is greater than or equal to the recovery value, the Secretary shall, within 45 days after notifying the borrower of such calculations, offer to restructure the loan obligations of the borrower under this chapter through primary loan service programs that would enable the borrower to meet the obligations (as modified) under the loan and to continue the farming operations of the borrower. If the borrower accepts such offer, within 45 days after receipt of notice of acceptance, the Secretary shall restructure the loan accordingly.
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